PGS strengthens capital base to invest in fleet expansionNews // November 16, 2010
Petroleum Geo-Services (PGS) has decided to effect a private placement, directed towards professional Norwegian and international investors.
The private placement comprises of up to 19,799,998 new shares, with the price to be determined through an accelerated book-building process.
The equity issue has been initiated in connection with the launching of a programme to renew and expand PGS' fleet of seismic vessels by building two fifth generation Ramform vessels.
The company expects that the new vessels will cost approximately US$250 million each, including construction follow-up, commissioning and a comprehensive seismic package.
The company expects that the yard contract will include the option for two further identical vessels.
PGS is currently in discussions with several qualified yards and expects to enter into a final contract early 2011. Delivery of the first vessel is expected in the first quarter of 2013 with the second vessel expected to be delivered one year later.
PGS said it has chosen to raise funds by means of an equity issue in order to maintain its robust financial profile and strategic flexibility. This will ensure that the company is positioned to proactively manage any period of weakness in the seismic market and finance the new build program and any subsequent exercising of options for additional vessels.
To demonstrate the company's commitment to return value to its shareholders over the business cycle, PGS has further concluded to initiate a dividend programme from 2011, with a recommendation to the 2012 AGM for the payment of dividend for the financial year 2011. Further details will be presented in conjunction with the company's reporting of its results for the fourth quarter of 2010.
PGS President and CEO, Jon Erik Reinhardsen commented:
"Our decision to renew and expand our fleet comes at a time when we expect growth in seismic demand. We are electing to raise equity to preserve our financial strength and strategic flexibility. We are dedicated to deliver shareholder value from this investment through increased earnings and introduction of a dividend program. "
These fifth generation Ramform vessels will further enhance PGS' position as a leader in 3D seismic acquisition productivity and efficiency. The vessels are designed to utilize and extract the full potential from the flagship GeoStreamer® technology. PGS expects that all of its 3D fleet will be equipped with GeoStreamer® by end 2013.
The vessel design is based on the demonstrated strengths of the current Ramform fleet, while improving capabilities along a number of key parameters. The new vessels will include a significantly upgraded GeoStreamer® based seismic package and are designed to take the full benefits of the GeoStreamer® towing efficiency. The vessels will further strengthen PGS' leading position in the fast growing High Density segment of the market, where large spreads, long streamers and towing efficiency are the key success factors. The High Density segments are driven by deep water exploration and production in geologically complex areas such as Brazil, West Africa and the Gulf of Mexico. Our GeoStreamer® technology is also opening up new markets in mature basins, such as the North Sea, where the higher fidelity data can reveal new geological plays.
Further information on the new build program will be given at PGS' Capital Markets Day in Oslo on December 14, 2010.